even months after President Trump accused the pharmaceutical industry of “getting away with murder,” he is busy lining the pockets of large pharmaceutical companies worldwide by giving them more power to charge higher prices overseas. Their price monopolies are likely to be extended under a draft executive order promising “greater intellectual property protection” in multilateral and bilateral trade agreements. The North American Free Trade Agreement, for example, has already been pegged to harmonize foreign intellectual property standards to reflect those found in the United States. Canada, it seems, will be the first target of U.S. indoctrination.
The Canadian government has been repeatedly excoriated for its failure to parrot U.S. intellectual property laws, receiving numerous reprimands in congressional hearings and Office of the United States Trade Representative reports for daring to define its own standards of patentability. While the U.S. vehemently defends its own sovereignty and singularity, it seems like it cannot tolerate these principles in other nations.
That was certainly the view held by U.S. pharmaceutical giant Eli Lilly when, in November 2012, it filed an investor-state arbitration claim against the Canadian government for overturning two of its pharmaceutical patents. As McGill University’s E. Richard Gold recently described in STAT, disgruntled with its losses, Eli Lilly sued the Canadian government for $500 million for its “radical departure” from U.S. intellectual property standards. Five years later, the company has spent more than $12 million trying to educate the Canadian government on what is, and what is not, an acceptable margin of change in its domestic law.
The company’s strategy to mold Canadian law in its image ultimately prevailed. In June, the Canadian Supreme Court delivered a stunning decision, overturning decades of Canadian precedent to arrive at the same standard of patentability demanded by Eli Lilly and applied in the U.S.
The U.S. Chamber of Commerce gleefully praised the decision, while Canadian academics lamented the boon to foreign patent holders at the expense of local startups. The Canadian Supreme Court had pre-empted NAFTA’s renegotiation, which had identified Canada’s patentability standards as a “serious problem” that would need to be addressed.
The chilling effect of investor-state arbitration on national sovereignty is not new, and the Eli Lilly case is only one in a long line of throw-downs by deep-pocketed corporations anxious to wring more profits out of foreign markets.
The Australian government spent six years (and millions of taxpayer dollars) defending its plain packaging laws from tobacco giant Phillip Morris in a dispute so decidedly comical it even made the desks of late-night comedy shows. That a sovereign nation could not pass laws designed to protect the health of its citizens without being slapped with a billion-dollar lawsuit seems so determinedly ridiculous that one has to wonder how these disputes continue to arise. But they do — in the shadows of corporate boardrooms, behind the closed doors of arbitral proceedings, and on the fringes of mainstream media.
Here’s another example. The Colombian government had sought to supply its citizens with an affordable generic version of Gleevec, a cancer drug made by Novartis. Worried about losing profits on its $15,000 pill, Novartis threatened the Colombian government with an investor-state dispute, and the Colombian government had no choice but to accede.
Similarly, the threat of an $800 million investor-state dispute was used by Gilead Sciences to force the Ukrainian government to deregister a generic drug that was competing with sofosbuvir (Sovaldi), Gilead’s $84,000 hepatitis C medication.
The increasing use of investor-state litigation by big pharmaceutical companies to bully sovereign nations into withdrawing public health measures reflects the broad and dangerous reach of investor-state arbitration. And the strategy isn’t limited to this industry.
Wealthy foreign companies can bring investor-state claims against any government measure that adversely affects corporate profits, including the closure of nuclear power plants, a ban on mining that was contaminating water, or the closure of a poisonous metal smelter.
National governments are increasingly confronting a shrinking domestic policy space, hemmed in by the chilling effect of closed-door arbitration that prioritizes profits over public health. As long as international trade agreements permit investor-state disputes, Eli Lilly, Phillip Morris, Novartis, and other companies will continue to bully sovereign nations into serving their bottom line.
As we continue to witness the private arbitration of public interests, we must ask ourselves whether Trump will continue abetting pharmaceutical companies at “getting away with murder.”
Brook K. Baker is a professor of law at Northeastern University in Boston and senior policy analyst for Health GAP (Global Access Project). Katrina Geddes is a research fellow at Global Access in Action at Harvard Law School.